[1992] HCA 66
- Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
[1982] HCA 44
- Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233
Judgment (9 paragraphs)
[1]
Solicitors:
Aubrey F Crawley & Co (Plaintiff)
Gells Lawyers (Defendant)
File Number(s): 2017/138566
[2]
Judgment
By his Third Further Amended Statement of Claim filed at the commencement of this hearing, on 11 May 2021, the Plaintiff, Mr Sam Changizi seeks certain relief against the remaining defendant, Mr Rizaie, having discontinued the proceedings against two other defendants, Mr Muradi and Mr Ali. Mr Changizi's claim relies on an assignment to him of the rights of European Metal Recyclers Pty Ltd (in liq) ("EMR"), and EMR was reinstated by orders made by the Court on 22 June 2018, for the reasons indicated by Gleeson J in Re European Metal Recyclers Pty Ltd (in liq) (dergd) [2018] NSWSC 946. The claims brought form part of a wider claim initially brought by Mr Changizi, including claims purportedly brought on behalf of two other companies, Puls Equipment Hire Pty Ltd ("Puls") and Australian Natural Resources Pty Ltd ("ANR"). Those claims are not pursued where Mr Changizi was not granted leave to bring them as derivative actions. The Defendant, Mr Rizaie, in turn brings a cross-claim ("Cross-Claim") against Mr Changizi relating to the circumstances of his investment in ANR.
As will emerge below, the allegations made by Mr Changizi are of a serious character, including an allegation of arson against Mr Rizaie and others. In determining those allegations, I have regard to the approach identified in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and its equivalent under s 140 of the Evidence Act 1995 (NSW). Where a party advances allegations of impropriety, the Court must take account of the gravity of the matters alleged in deciding whether the inference should be drawn and, although the standard of proof remains proof on the balance of probabilities, the strength of the evidence necessary to establish a given fact to the civil standard may vary according to the nature of what it is sought to be proved. In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449-450; [1992] HCA 66, the plurality observed that:
"The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct." [citations omitted]
Section 140 of the Evidence Act similarly provides that, in a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities and that, without limiting the matters that the Court may take into account in deciding whether it is so satisfied, it is to take into account the nature of the cause of action or defence, the nature of the subject-matter of the proceeding and the gravity of the matters alleged. I approach the evidence in Mr Changizi's claim (and, to the extent appropriate, Mr Rizaie's Cross-Claim) on that basis.
[3]
Affidavit evidence, oral evidence and records of interview
I will first set out the affidavit evidence before turning to Mr Changizi's case against Mr Rizaie in respect of EMR and Mr Rizaie's case against Mr Changizi in respect of ANR. Mr Changizi relied on several affidavits, dated 17 March 2018, 6 July 2020 and 13 May 2021. In his first affidavit dated 17 March 2018, Mr Changizi gave evidence of how he met Mr Rizaie and claimed, by way of bare assertion, that EMR's business returned a profit of approximately $200,000 per annum. That assertion is not corroborated by financial statements or tax returns; Mr Changizi claims that EMR's financial records were destroyed in the fire to which I refer; but no records of tax paid by EMR on any profit of that amount were tendered. Mr Changizi refers to the circumstances in which Mr Rizaie acquired shares in EMR, and Mr Muradi and Mr Ali also contracted to acquire shares in EMR, although he contends that Mr Muradi and Mr Ali did not pay for their shareholdings. It is not necessary to address that question giving the findings I reach on other grounds.
He refers to a telephone call on 2 May 2007, when he was advised of a fire at the business premises occupied by EMR and the circumstances in which he became aware that the insurance on the property (or, more accurately, any insurance on the business) had lapsed. He also refers to a telephone conversation with Mr Rizaie in which he had asked Mr Rizaie did he "cancel" the insurance and Mr Rizaie had asked why would they pay $12,000 for insurance of scrap steel, which no-one would steal and no-one would burn. I am not persuaded that a conversation occurred in those terms, given my findings as to Mr Changizi's credit; and, in any event, the insurance was not cancelled but not renewed, some 15 months before the fire, and Mr Changizi as a director of EMR had at least the same opportunity as Mr Rizaie to reinstate that insurance cover in that long period.
Mr Changizi refers to a subsequent conversation in which Mr Rizaie advised that, where the building had been destroyed and the equipment had been damaged, "we finish this partnership" and Mr Changizi then claimed he could rebuild the business. Mr Changizi's evidence was that he moved the business into other space occupied by the owner of the premises some 3-4 weeks later (Changizi 17.3.18 [34]). That evidence was plainly false, because Mr Changizi left Australia for Hong Kong, Bangkok and then Pakistan some 15 days after the fire and did not return for about nine months. Mr Changizi also refers to the fact that Mr Rizaie and others incorporated Metal Top Recycling Pty Ltd ("MTR") and leased new premises and claimed that he observed assets of EMR being used in the MTR business (Changizi 17.3.18 [39]) and that EMR's truck was also being used in that business (Changizi 17.3.18 [40]), but was returned to Mr Changizi and then sold. I recognise that MTR used at least some storage bins from EMR in its business, a dispute as to that matter was then resolved by an informal dispute resolution mechanism within the local Hazara community, and EMR's assets were then split between its shareholders. Mr Changizi also refers to the odd development that, some 7 years after Mr Rizaie was alleged to have burnt down the premises used in EMR's business, he and Mr Changizi discussed his becoming a partner with Mr Changizi in ANR's oil recycling business. I address the dispute in respect of that business below. Mr Changizi also refers to a conversation in respect of an invoice for the acquisition of several oil tanks for ANR which I address in dealing with Mr Rizaie's Cross-Claim below.
[4]
Chronology of events in respect of EMR
I now turn to Mr Changizi's pleaded case against Mr Rizaie in respect of EMR and the chronology of events in respect of that case. In setting out that chronology, I reach findings as to the material events on which the parties rely, which they were directed to include in their respective chronologies.
Mr Rizaie contends that, on 20 April 2005, agreement was reached between Mr Changizi, Mr Rizaie and a third person to enter into a partnership to run a scrap metal business with Mr Changizi having a 55% interest, Mr Rizaie a 20% interest and the third person a 25% interest (Ex P2, 407-409) It is common ground that EMR was incorporated on 13 May 2005, that Mr Rizaie was appointed a director of EMR on its incorporation and was a 20% shareholder of EMR on its incorporation and that EMR then operated a scrap metal recycling business known as "M&H Scrap Metal" from premises at Smithfield from the about the time of its incorporation (3FASC [80]-[83], [84]-[85], Defence [48]; Ex P2, 398-402). On 3 June 2005, the third person ceased to have an interest in EMR and his shares were transferred to Mr Changizi who then held 80% of the shares in EMR (Rizaie 16.10.19, [48]-[50]; Ex P2, 412).
EMR conducted its business from leased premises on which several units occupied by different business were situated. Mr Changizi pleads, and Mr Rizaie does not admit, that EMR had certain fixtures, fittings and equipment ("Equipment") used at its Premises. Mr Changizi does not plead, and the evidence does not establish that EMR either owned that equipment or had any economic equity in it so as to give rise to any claim for loss in respect of that equipment.
A lapse notice dated 4 April 2006 in relation to workers compensation insurance indicates that it lapsed due to non-payment; a lapse notice relating to "annual cargo" indicated that it lapsed for the same reason; there is a quotation for insurance which covered all other contents to a value of $110,000, stock-in-trade to a value of $100,000 and removal of debris to a value of $25,000 for "fire and perils", but there no evidence that that insurance was paid for and no lapse notice in respect of it (Ex P2, 429-434).
Mr Rizaie contends that, in March 2007, agreement was reached between Mr Changizi, Mr Rizaie and Mr Ali by which Mr Ali would become a shareholder in and director of EMR, and Mr Changizi would transfer 30% of the shares in EMR to Mr Ali and 10% of the shares to Mr Rizaie (Ex P2, 418). Mr Rizaie also relies on an agreement in March 2007 between Mr Changizi, Mr Rizaie, Mr Ali and Mr Muradi by which Mr Ali and Mr Muradi would become shareholders in and be appointed as directors of EMR, and Mr Changizi was to transfer 25% of the shares in EMR to Mr Ali, another 25% of the shares to Mr Muradi and 5% of the shares to Mr Rizaie (Ex P2, 424-425).
[5]
Mr Changizi's pleaded case in respect of EMR
Mr Changizi's pleaded case is in narrow compass. Mr Changizi (as EMR's assignee) pleads, and Mr Rizaie admits, that Mr Rizaie owed specified statutory and fiduciary duties to EMR, as a director of EMR, including duties to act in good faith and in EMR's best interests and for a proper purpose under s 181 of the Corporations Act, duties as to the use of position and use of information under s 182-183 of the Act, and fiduciary duties, the content of which is not pleaded, but which would comprise the no conflict and no profit rules. In closing submissions, Mr Bulley, who appears for Mr Changizi, indicated that Mr Changizi did not press the claims for breach of statutory duties, which he accepted he did not have standing to bring although he relied on an assignment of EMR's claims by its liquidator to him: MG Corrosion Consultants Pty Ltd v Gilmour (2012) 202 FCR 354; 88 ACSR 170; [2012] FCA 383; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 at [390]ff.
Mr Changizi pleads, and Mr Rizaie admits, that the premises occupied by EMR were destroyed by fire on 2 May 2007 (3FASC [87], Defence [50]). Mr Changizi also pleads that that fire was started or caused to be started by Mr Rizaie either alone or in concert with the two Defendants against whom the case is not pursued, Mr Ali and Mr Muradi. This allegation is particularised by reference to an admission alleged to have been made by Mr Rizaie in a conversation with Mr Changizi and Mr Mousawel on 2015, although Mr Changizi also relied on several other admissions asserted to have been made by Mr Rizaie in the course of the hearing. I address the evidence as to the admissions on which Mr Changizi relies below. Not surprisingly, Mr Rizaie denies that allegation and he pleads that Mr Changizi was in dispute with the owner of an adjoining factory unit where a car repair business was operated and had accused that person of starting the fire; Mr Rizaie was not in Sydney at the time of the fire, and denies that he made any admission in relation to the fire (Defence [51]).
Mr Changizi pleads that the Equipment was destroyed by the fire; Mr Rizaie admits that EMR's property was destroyed but does not otherwise admit the allegation and, implicitly, does not admit that EMR owned the Equipment or had any equity in it (3FASC [89], Defence [52]). I have held above that the evidence does not establish that EMR owned or had any equity in the Equipment so as to suffer any loss in that respect. Mr Changizi also pleads that all of EMR's books, accounts and records were destroyed in the fire; Mr Rizaie contends that Mr Changizi attended to EMR's office work at his home and does not admit the destruction of EMR's books of account and records by the fire (3FASC [90], Defence [53]). Mr Changizi pleads, and Mr Rizaie admits, that M&H was unable to continue its business by reason of the fire.
[6]
Mr Rizaie's Cross-Claim and chronology of events in respect of ANR
As I noted above, Mr Rizaie brings a Cross-Claim alleging misleading or deceptive conduct against Mr Changizi in respect of Mr Rizaie's investment in ANR. Mr Carney submits that Mr Rizaie has established that Mr Changizi made the asserted representation to him concerning the acquisition of several oil tanks for ANR that was fraudulent or misleading and deceptive; that Mr Rizaie relied on this representation to his detriment and suffered loss as a result of his reliance; that his reliance on the representations made by Mr Changizi was based on conversations he had with him in 2015 and an invoice for the purchase of seven oil tanks, and was further strengthened by the Partnership Agreement of 2015; that Mr Rizaie's credit was untouched during cross-examination (a matter that I addressed above) and the Court ought to be satisfied that his version of events is to be believed over that of Mr Changizi; and the quantum of the damages on the Cross-Claim is $600,000, less monies later recovered by Mr Rizaie.
Mr Carney summarises the Cross-Claim as follows :
"The Cross-Claimant's case is that he was induced to enter a deal with Changizi on the representation that Changizi had paid $1,050,000.00 plus GST for the purchase of seven storage tanks and that Rizaie should match this contribution by putting $1,000,000.00 into the business ANR.
Mr Rizaie relied on that representation to enter the deal.
The events that unfolded, and in particular the discovery that the invoice for the tanks was false, led Rizaie to realise he had been cheated by Changizi and led him to get out of the business, and mitigate his loss.
The facts and the basis of the Cross-Claim are on all fours with the High Court decision in Gould v Vaggelas (1984) 157 CLR 215, 236.
Mr Rizaie is entitled to a full refund of his $600,000 contribution, less what he recovered that being an amount of $142,332.15."
I now turn to the chronology of events concerning the Cross-Claim brought by Mr Rizaie in respect of ANR. I have again reached findings below as to the material events on which the parties rely, which they were directed to include in their respective chronologies.
ANR was incorporated on 10 November 2014 and Mr Changizi was appointed a director of ANR on that date. Mr Rizaie's evidence is that, in mid-2015, Mr Changizi approached him to join in an oil recycling business and I will refer to his evidence as to discussions and an invoice concerning oil tanks for that business in dealing with his Cross-Claim below. On 11 September 2015, Mr Rizaie was appointed a director of ANR (Ex P2, 485). Mr Changizi also relies on discussions on 15 November 2015 between Mr Changizi and Mr Rizaie in relation to Mr Rizaie's investment in ANR (Changizi 17.3.18, [57]; Rizaie 16.10.19 [74]; Changizi 6.7.20, [62]-[63]).
[7]
Mr Rizaie's pleaded case in respect of ANR
By his Amended First Cross-Claim, Mr Rizaie in turn brings a claim for misleading and deceptive conduct against Mr Changizi in respect of his investment in ANR. Mr Rizaie pleads (AFCC [7(a)-(b)]) that, in about August 2015, Mr Changizi made a representation to him that Mr Changizi had (identifying its elements for clarity) (1) contributed fuel storage tanks to ANR (2) by purchasing them on behalf of ANR or causing them to be transferred to ANR and (3) that the value of the fuel storage tanks contributed to ANR by Mr Changizi was $1,050,000 ("Contribution Representation"). Mr Rizaie particularises that representation as made orally and in writing by statements at a meeting and by the invoice dated 12 June 2015 issued to ANR by All Oils Australia Pty Ltd ("All Oils") which he contends was provided by Mr Changizi to him.
Mr Changizi responds (Defence [7]) that he told Mr Rizaie he had acquired the fuel tanks for free; that he would and did make the fuel tanks available to ANR for use in its business; he denies that he represented he had purchased the fuel tanks; and he contends that the tax invoice was created at Mr Rizaie's request to falsely represent the supplier of the fuel tanks and the cost of the fuel tanks to enable Mr Rizaie to obtain third party funding to pay his contribution to the capital of ANR. I am not persuaded of these matters, given the adverse view I have formed of Mr Changizi's credit, but it does not follow that I should accept Mr Rizaie's account of events because I do not accept Mr Changizi's account of those events.
I now turn to the evidence as to this matter. I treat Mr Rizaie's evidence as to this matter with caution, where I have noted the uncertainty as to the extent to which he spoke and understood English and the lack of transparency in his evidence about that matter. His affidavit evidence is that, in mid-2015, Mr Changizi approached him to join in an oil recycling business and, in the second half of 2015, he had a conversation with Mr Changizi as follows (Rizaie 16.10.19 [81]):
Changizi: "You just do the administrative work such as hiring employees to do the job. I do the marketing. I have already purchased the tanks to start the business. I found them very cheap. This is the receipt for the purchase and there are some photos of the tanks (he showed me the receipts for the 7 tanks with a total price of 1,155,000 AU$).
Rizaie: "Why did you buy them so expensive?"
Changizi: "No, I bought them very cheap. Look, I have the contact name of a person who makes such tanks. Let's call and ask him how much would he charge to make such tanks."
The reference to "receipts" in this evidence is plainly incorrect, since the document on which Mr Rizaie relies is an invoice recording an unpaid amount in respect of oil tanks that are oddly described as "purchased for free", and not a receipt for any paid amount.
[8]
Orders and costs
Each party's claim has therefore failed, and my preliminary view is that there should be no order as to the costs of the proceedings. I will, however, allow the parties an opportunity to make written submissions as to costs within 7 days, not exceeding 5 pages in one and a half spacing.
[9]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 03 June 2021
In his further affidavit dated 6 July 2020, responding to Mr Rizaie's affidavit dated 16 October 2019, Mr Changizi refers to several occasions on which he claims to have taken Mr Rizaie to meet his customers and buyers (Changizi 6.7.20 [12]) and refers to two further customers of the business (Changizi 6.7.20 [15]). Mr Changizi denies that Mr Rizaie could not read English, and claims to recall him reading contracts and invoices, although asking for an explanation if he could not understand a particular word (Changizi 6.7.20 [26]). He accepts (Changizi 6.7.20 [36]) that he initially believed that a third party (with whom Mr Changizi had a physical confrontation in early 2017, as to which Mr Changizi was charged, convicted and fined) had burned down the premises. Mr Changizi's evidence is that Mr Rizaie was at the warehouse on the date of the fire and drove the truck out of the warehouse and parked it on the street; he claims to have met Mr Rizaie at a butcher's shop operated by Mr Sharifi in Western Sydney on that evening, for a discussion about monies payable by Mr Ali to acquire shares in EMR; and he sets out a lengthy discussion with Mr Sharifi and Mr Rizaie at that butcher shop on that date. Mr Sharifi initially led affidavit evidence supporting that claim, from which he resiled in cross-examination. Mr Changizi also acknowledges that, after the fire and his return from overseas, he and others subsequently started to operate a scrap metal business in another company, Metal World Pty Ltd ("Metal World"). Mr Changizi also gives evidence of a discussion about the oil recycling business and Mr Rizaie's investment in ANR, which I address in dealing with Mr Rizaie's Cross-Claim below.
Mr Changizi referred (Changizi 6.7.20 [64] to a conversation with Mr Rizaie about visiting a solicitor concerning the proposed Partnership Agreement in respect of ANR, in which Mr Changizi is said to have made a further admission in elaborate terms. I will return to that evidence below. Mr Changizi then led evidence of a conversation at the office of lawyers in mid-December 2015 in which, on his evidence, Mr Rizaie radically departed from his earlier position that he could not admit burning down the factory in front of lawyers, and proceeded to do so in vivid terms. On objection, I required that Mr Changizi's evidence of that conversation be given in oral form and I will address that evidence below. Mr Changizi also referred to a conversation with a bank employee, Mr Mousawel, in which Mr Changizi is also said to have made an admission as to burning down the factory, and I will address his oral evidence as to that conversation below. Mr Changizi also referred to a conversation in which Mr Rizaie is said to have made a similar admission, at the offices of an accountant, Mr Mina, on 9 December 2019, and I will also address that conversation below. Mr Changizi also addressed dealings with a Melbourne business, as to which a dispute had developed, in evidence which became relevant because Mr Rizaie claimed that he was in Melbourne to meet with legal advisers concerning that dispute at the time that the fire occurred.
Mr Carney, who appears for Mr Rizaie, submits that Mr Changizi's evidence was evasive, dishonest and unreliable and there are substantial difficulties with that evidence. Mr Changizi claimed, in his affidavits, to have a detailed recollection of conversations, which he set out at length, but claimed to have a poor recollection of many other matters in cross-examination, and responded to many questions with the equivocal "could be". He seemed to me to be seeking to avoid committing himself in cross-examination as to a falsifiable account of events, except where he considered that his evidence would advance his interests. There were significant inconsistencies between the evidence he gave in these proceedings and the evidence he gave in interviews by the New South Wales Police in respect of the fire and EMR's business. I am satisfied that I should place no reliance on Mr Changizi's evidence unless it is corroborated by documents, which is rarely the case, or is adverse to his interest.
Mr Changizi was cross-examined at length in relation to the interviews with him undertaken by the Police (Ex D1) in relation to the investigation of the fire. In his first interview by the Police on 2 May 2007, Mr Changizi referred to negotiations with the owner of the premises to take up another unit at the premises (Ex D1, 303), which generated conflict with the tenant of those other premises. Mr Changizi referred to his partner, presumably Mr Rizaie, refusing to accept the insurance package proposed by the broker, although his evidence to the Police appears to have significantly overstated the amount of the premium for that insurance (Ex D1, 311). He referred to his movements on the afternoon of the fire (Ex D1, 334) but did not then refer to the visit with Mr Rizaie to a butcher's shop in western Sydney (to which I refer below) on which he now places significant weight in order to seek to establish that Mr Rizaie was in Sydney and not in Melbourne (as Mr Rizaie claims) at the time of the fire. He claimed that the business was "very profitable" prior to the fire and identified customers to which he sold scrap metal as being large scrap metal dealers, but indicated that there had been no new clients over the last 12 months, and that there had been cashflow problems with the business before the partners were brought into the business and he did not then have "cash money" (Ex D1, 356). He also referred to another tenant at the premises (not Mr Rizaie) seeking to become a partner in the business, in exchange for making additional space available for that business; to his declining that suggestion and indicating that he would approach the owner to lease those premises, and to that tenant having made the prescient observation that:
"Listen, Sam, if you, I know you put your applications for the landlord for this place, for this place, I know my thing will be, my, my contract will be expired, I know after one year I can't live in here but if you get this place, you get this place, you can't run your business, if you can't, if you can run your business in here I will come in, I will burn your business, I will burn your life." (Ex D1, 365-366)
The Police also asked Mr Changizi about the fact that he had been given a written notice from the landlord to clean up the relevant premises, under threat that EMR would be required to vacate the premises (Ex D1, 374) and that a cheque had been given to the landlord, in respect of an expansion of the area occupied by EMR which had been dishonoured by the bank, and the landlord had then indicated that he had changed his mind about permitting an expansion of EMR's premises and said "I can't trust you, you've got no money in the bank" (Ex D1, 377). Mr Changizi also then identified the person who he suspected had set fire to the premises, who was not Mr Rizaie (Ex D1, 380).
At a second interview of Mr Changizi by the Police on 7 March 2008, after he had returned from overseas, an interpreter was present and interpreted part of the interview. Mr Changizi repeatedly referred to amounts that he claimed were not paid or were partly paid by Mr Muradi and Mr Ali in respect of their investment in EMR's business and expressed extravagant ambitions for the business, claiming to have the knowledge and experience to run the business if it had 1,000 investors and $100 million (Ex D1, 152). He claimed that "business was good" before the new partners came in and could have been doubled or tripled with additional partners (Ex D1, 153). Mr Changizi was there asked about his travelling overseas, immediately after the fire, and how he had supported himself while overseas. His evidence to the Police was plainly inconsistent with any proposition that he wished to take up an interest in MTR and he told the Police that he had not yet been offered a share in the new business; that he did not wish to invest with Mr Rizaie, Mr Ali and Mr Muradi, even if they offered an opportunity to do so and that:
"My plans there is a lot of opportunity, a lot of people there calling me right now to come join with us because I have lot of experience, I have customers, I have everything, even from my own community people they offer me, they said to me, please come with us, we'll give you a share, work with us. I told them OK. One of my big customer in, in Griffith he offered me, he sold his farm for $1.4 million and he said he waiting for me, it is possible can you come join … company. He said, is it possible can you come establish my company? I told him … there's a lot of people." (Ex D1, 181)
I prefer Mr Changizi's then account that he would not have invested in the MTR business to the contrary position that he now takes in these proceedings, many years after the event.
Mr Changizi also relied on the affidavit dated 14 March 2018 of Mr Chaudhry, solicitor, who referred to his overhearing a conversation between Mr Changizi, Mr Rizaie and his then employed solicitor, Mr Aziz (who has since returned to Pakistan) in December 2015, concerning a proposed Partnership Agreement between Mr Changizi and Mr Rizaie in respect of ANR. Mr Chaudhry presented as an honest witness, doing his best to recall a conversation which he overheard many years ago, and he significantly qualified his affidavit evidence in cross-examination as I note below.
Mr Changizi also relied on the affidavit dated 6 July 2020 of Mr Sharifi, which had not been prepared with the assistance of an interpreter. Mr Sharifi is the owner of a butcher shop at Merrylands and has known Mr Changizi for approximately 20 years through the Hazara community. He initially gave evidence, in English, of a meeting with Mr Changizi and Mr Rizaie at about 6.30pm on 1 May 2007 at his butcher shop, and that Mr Rizaie arrived for that meeting in a truck used in EMR's scrap metal business. I rejected that affidavit evidence when it became apparent that there was an issue as to the extent of Mr Sharifi's language skills in English, and granted leave to lead oral evidence through an interpreter. Mr Sharifi's oral evidence was that he had not read through his affidavit in English before he signed it, and only understood what Mr Changizi had explained to him of that affidavit, although I recognise that the affidavit was signed in the presence of Mr Changizi's solicitor who gave evidence on the voir dire as to the process which he had adopted and his belief that Mr Sharifi had understood it. Mr Sharifi's evidence was that he did not recall a meeting that Mr Changizi and Mr Ali on that date and, if it had occurred, Mr Rizaie did not attend it. I am satisfied that Mr Sharifi was giving evidence to the best of his recollection. That evidence does not support Mr Changizi's claim that Mr Rizaie was in Sydney on the evening of 1 May 2007, and there is strong evidence that he was in Melbourne in the early afternoon on that day, although that does not exclude the possibility that he could have flown back to Sydney overnight in sufficient time to set the fire.
I now turn to the evidence on which Mr Rizaie relies. In his affidavit dated 16 October 2019, Mr Rizaie referred to his education and background, and I will return to the extent to which he speaks English below. He refers to the circumstances in which EMR's business was established. His evidence is that he was in Melbourne in early May 2007, when the fire occurred at EMR's premises, and he received a telephone call from Mr Muradi who told him the yard was on fire. He also refers to Mr Changizi's then suspicion as to the identity of a third party who had set the fire. He refers to a meeting after the fire where Mr Changizi said, in Farsi, that "everything is burnt, the business is finished" and the landlord then advised, in English, that "you are not allowed to do business anymore" and Mr Changizi indicated that he was "out of this" and was going overseas. Mr Rizaie's evidence is that Mr Changizi kept EMR's business records at his home and that Mr Changizi did the paperwork because of his knowledge of the English language and Mr Rizaie's lack of familiarity with the English language and the accounting system used in the business, and that Mr Changizi also attended to business matters for EMR including the insurance. Mr Rizaie denied cancelling the insurance policy held by EMR and claimed to be unaware of the cancellation of that policy. He refers to the circumstances in which he, Mr Ali and Mr Muradi started MTR's business, and to Mr Changizi's subsequent involvement in a competing business, Metal World.
Mr Rizaie also referred to the circumstances in which he became involved in ANR's oil recycling business with Mr Changizi, and referred to a conversation in the second half of 2015 on which he relies in his Cross-Claim. I will address that conversation in dealing with that Cross-Claim below. Mr Rizaie then addresses the circumstances of his investment in EMR, and meetings with an accountant in relation to the business, the subsequent meetings with Ms Lata, Mr Aziz of MCI Lawyers, Mr Mina, and his evidence is that the conversations at those meetings largely did not take place in languages which he understood. I will address Mr Changizi's reliance on admissions that he claims Mr Rizaie made at those meetings below. He also refers to subsequent steps taken in relation to the business.
By a further affidavit dated 13 May 2021, Mr Rizaie annexed documents confirming that he was in Melbourne on 1 May 2007, the day before the fire, for a meeting with legal advisers in another matter. That evidence was supported by a further affidavit dated 13 May 2021 of Mr Pickering, a Victorian solicitor acting in that other matter. That evidence makes it unlikely that Mr Rizaie would have been in Sydney in sufficient time to meet with Mr Changizi and Mr Sharifi, as Mr Changizi contended, in the late afternoon on that date. It does not make it impossible for Mr Rizaie to have flown back to Sydney that evening and to have been involved in the setting of the fire on the next morning.
A preliminary issue arises as to the extent of Mr Rizaie's ability to speak English, where Mr Changizi largely relies, for his allegation that Mr Rizaie was involved in starting the fire, on admissions that he claims Mr Rizaie made during meetings with other witnesses, which it now appears were largely conducted in English, although Mr Rizaie did not accept that in his evidence in chief. Mr Rizaie was cross-examined through an interpreter, although he occasionally showed understanding of or answered simpler questions in English. Mr Rizaie's evidence is that he has learnt most of his English "in a work place situation in Australia and from fellow workers" (Rizaie 16.10.2019 [21]) and he also refers to having undertaken some English language education, for three months at TAFE in Western Australia, where he received formal instruction in English. His evidence in that affidavit was that he "cannot read English" and does not have "a strong understanding of spoken English" and he also referred to that matter in his evidence that he relied on Mr Changizi for completion of paperwork related to the business. His evidence (Rizaie 16.10.2019 [191]) is also that his "poor English skills at the time" led him to accept everything suggested by Mr Changizi in relation to the documents exhibited to his affidavit dated 17 March 2018. Mr Carney also opened Mr Rizaie's case on the basis that he has "limited ability to speak English" (T18) and that evidence found some support in oral evidence of his accountant, Mr Mina, that he "required translation" to deal with Mr Rizaie and often used his office manager to assist Mr Rizaie to understand what was being said (T257). Mr Mina also referred, in cross-examination, to Mr Rizaie's "saying yes on everything" (T261), a matter to which I return below.
There is evidence that Mr Rizaie can read and write basic English, having regard to a bundle of text messages in English (Ex P1) which Mr Changizi claims were sent by Mr Rizaie. Screenshots of those text messages indicated they were sent under or recorded in Mr Changizi's phone under the name "Hasan Ehsani". In cross-examination, Mr Rizaie denied that he went by that name and affirmed his identity as "Hussain Rizaie", and then said in cross-examination that he could not recall the relevant documents. It seems to me that the reference to "Hasan Ehsani" is likely a reference to Mr Rizaie, where his affidavit evidence (Rizaie 16.10.2019 [27]) is that he runs a money exchange business known as "Ehsan Money Exchange" and he also gave that evidence in his record of interview by the Police. The subject matter of the texts appears to be dealings between Mr Changizi and Mr Rizaie, including requests for Mr Changizi to pay bills that Mr Rizaie would have wanted to be paid. In closing submissions, Mr Carney speculated that a person assisting Mr Rizaie could have sent the text messages, but Mr Rizaie did not give evidence to that effect in cross-examination. Second, and importantly, there is (as Mr Carney accepts) evidence of Mr Rizaie's ability to understand spoken English in his record of interview by the Police in May 2007, which extended for a considerable time and where he appears to have understood simple concepts explained in English without the need for an interpreter, and given responsive answers. Mr Rizaie accepted this in his cross-examination (T334).
It seems to me that Mr Rizaie at relevant times had and has a greater understanding of and ability in the English language than disclosed by his affidavit evidence, although I also think it likely that (as Mr Carney submits) he has lesser ability with written than with spoken English. However, I am by no means satisfied on the balance of probabilities (and having regard to s 140 of the Evidence Act) that he understood the whole of the long (and self-serving) speeches made by Mr Changizi, on which Mr Changizi relies as admissions, if (contrary to the view I have formed) they occurred in the elaborate versions put by Mr Changizi.
Mr Carney also submits that Mr Rizaie should be believed as he has been steadfast in his evidence and untouched in cross-examination. I would not go that far, and I approach Mr Rizaie's evidence with caution where it seems to me that he understated the extent to which he reads and speaks English in his affidavit evidence. I do accept that some aspects of Mr Rizaie's evidence, including as to the existence of third parties with motivations to set the fire, are consistent with the interviews conducted by the Police and their investigation following the fire.
Mr Rizaie also relies on the affidavit dated 12 December 2019 of Mr Muradi, formerly a defendant in the proceedings. Mr Muradi referred to events on the night of the fire at EMR's premises, and he refers to hearing a loud noise that sounded like a substantial explosion, where he lives near the premises, and also receiving a call from Mr Ali who told him the factory was on fire and he had received that information from the back to base alarm system. Mr Muradi says that he walked towards the factory and describes what he saw, and refers to Mr Changizi having called him or his calling Mr Changizi and advising of the fire. His evidence was that Mr Rizaie was then in Melbourne and somebody informed him of events at some stage. Mr Muradi refers to Mr Changizi having blamed a third party for starting the fire and refers to a dispute between Mr Changizi and that third party, a physical fight that had occurred between them several months earlier and continuing issues between them.
Mr Muradi's evidence was that Mr Changizi attended to administrative matters relating to EMR from his home and that he had not seen books of account or documents at the factory, contradicting Mr Changizi's evidence that those books were destroyed in the fire. Mr Muradi also refers to Mr Changizi having told him that Mr Changizi was going overseas, because his mother was ill in Pakistan, and to Mr Rizaie then indicating that he did not want to be in partnership with Mr Changizi anymore. Mr Muradi's evidence is that Mr Changizi told him that he did have any money to invest in a new business and that Mr Muradi was "free to do whatever business you like". He refers to a later resolution, within the Hazara community, of Mr Changizi's complaint that EMR had taken equipment that was not burnt in the fire and to Mr Changizi's having opened a new business, Metal World, in competition with MTR. By a further affidavit dated 9 April 2021, Mr Muradi referred to his earlier affidavit and addressed the circumstances in which he became a shareholder in EMR, by purchasing the shares from Mr Changizi, and claims that Mr Changizi was responsible for EMR's accounts and instructing its accountant. He refers to his having received a telephone call advising of the fire on the morning of 2 May 2007 from Mr Ali, expands his earlier evidence as to what he saw of the fire, and repeats Mr Changizi's allegation made at that time that a third party had set the fire and refers to the previous dispute between Mr Changizi and that third party. He again refers to the circumstances in which the MTR business was established and to the resolution of Mr Changizi's claim to a truck and bins from EMR's business within the Hazara community. Mr Muradi was not cross-examined.
Mr Rizaie also reads the affidavit dated 9 April 2020 of Mr Ali, previously a defendant in the proceedings, who referred to his having become a shareholder in EMR by purchasing shares from Mr Changizi and claims that he had paid the purchase price for those shares to Mr Changizi. Mr Ali's evidence is that he understood Mr Rizaie was in Melbourne on 2 May 2007, the date of the fire, and he received a telephone call from the Police in the early morning on that day advising him of the fire. His evidence is that he called Mr Muradi and then Mr Rizaie to tell them of the fire. He also refers to an allegation made by Mr Changizi at that time that a third party had started the fire and to the conflict between Mr Changizi and that third party, and to the owner of the premises having refused permission for EMR to continue to operate the business at the premises following the fire. Mr Ali's evidence, consistent with Mr Muradi's evidence, is that Mr Changizi then said:
"There is nothing left here, you decide your own future from here. I have things to do overseas, I am out of this business."
Mr Ali also refers to the circumstances in which he became involved with MTR and to a resolution of a dispute as to MTR's use of bins and a truck from the EMR business within the Hazara community, by some of the bins and the truck being given to Mr Changizi and MTR keeping the remainder of the bins. Mr Ali was also not cross-examined.
The parties also tendered, without objection, a detailed witness statement dated 16 July 2008 prepared by a member of the Property Crime Squad, Arson Team which summarised the evidence that the Police had obtained in respect of the fire (Ex D1, 45ff). That statement recorded the suspicion of the landlord that either Mr Changizi or a third party had been responsible for the fire and referred to information (which the Police do not appear to have confirmed) that that third party had previously been gaoled for burning down a business two years before (Ex D1, 80). The Police also interviewed Mr Changizi and Mr Rizaie, and I refer to their interviews above, Mr Ali and Mr Muradi and many other witnesses. That statement also noted the suspicions then held by Mr Changizi and the other persons associated with EMR that a third party was responsible for the fire. The Police concluded that they were then unable to identify the persons who set fire to the premises (Ex D1, 140).
On 1 April 2007, Mr Changizi provided a cheque of $23,100 from EMR's account for the lease of additional units at the premises occupied by EMR to the lessor, to commence from 1 July 2007, but that cheque was dishonoured by the bank (Changizi record of interview, 4.5.2007, Ex D1, 350, 609). In mid-April 2007, a vehicle outside EMR's premises was set on fire (Changizi record of interview, 4.5.2007, Ex D1, 372).
On or about 27 April 2007, Mr Rizaie went to Melbourne in connection with a dispute involving a business there and he remained there until at least the afternoon of 1 May 2007, when he signed a costs agreement with the solicitors acting in that matter (Rizaie record of interview, Ex D1, 448). I am unable to reach a finding as to when he returned to Sydney, absent travel records, and unable to be satisfied that he was, or was not, in Sydney at the time of the fire noted below.
In the afternoon on 1 May 2007 at about 5pm, Mr Changizi went to EMR's premises, Mr Ali and Mr Muradi left those premises about 5pm and Mr Changizi's evidence to the Police was that he then went to his mother-in-law's house and then to his home (Ex D1, 326, 334). That evidence, given to the Police shortly after the fire, differs from Mr Changizi's different account of his movements given in these proceedings and it is not necessary to determine the question whether either, or neither, account is true. In the early hours on 2 May 2021, the premises occupied by EMR were destroyed or substantially damaged and adjoining premises were also damaged by fire.
On 2 May 2007, two cash withdrawals of $27,000 and $15,000 were made from EMR's bank account (Ex D1, 608). I am not able to reach a finding, given the conflicting oral evidence and the inadequacy of the documentary evidence, as to who made those withdrawals.
On 4 May 2007, Mr Changizi, Mr Rizaie, Mr Ali and Mr Muradi discussed the possibility of continuing EMR's business (Changizi record of interview 7.3.2008, Ex D1, 165-166).
On 17 May 2007, a further cash withdrawal of $10,000 was made from EMR's bank account (Ex D1, 607). I am also not able to reach a finding, given the conflicting oral evidence and the inadequacy of the documentary evidence, as to who made that withdrawal, although I note its proximity to Mr Changizi's departure for overseas. Also on that date, Mr Changizi left Australia to travel to Hong Kong, Bangkok and then Pakistan, where he claims his mother was ill (Changizi record of interview 7.3.2008, Ex D1, 157-158). Mr Changizi did not return to Australia until February 2008 (Changizi record of interview 7.3.2008, Ex D1, 156).
It is common ground that MTR was incorporated on 20 July 2007 and Mr Rizaie, Mr Ali and Mr Muradi were its equal shareholders and directors (Ex P2, 443-445).
Shortly after his return to Australia, on 3 March 2008, Mr Changizi applied for a copy of the incident report concerning the fire (Ex D1, 681) and, on 7 March 2008, he was again interviewed by the Police in respect of the fire (Changizi record of interview, 7.3.2008, Ex D1, 145).
Mr Changizi relies on several meetings between himself, Mr Rizaie and third parties, which he dates as occurring in 2015 prior to his and Mr Rizaie's entering into a "partnership' in respect of ANR, in which he contends Mr Rizaie made admissions that he and others had burned EMR's premises and appropriated its business. I address those meetings below. A written Partnership Agreement (Ex P2, 491ff) in respect of the ANR business was subsequently executed. Although it records that the partnership starts on 29 September 2015, Mr Chaudhry's evidence suggests that it was not executed until December 2015.
EMR was later placed in liquidation and, on 30 October 2018, the liquidator of EMR assigned any cause of action available against Mr Rizaie to Mr Changizi (3FASC [101]). No point was taken as to whether the liquidator required, or had obtained, the Court's approval under s 477(2B) of the Corporations Act for that assignment.
Mr Changizi also pleads that, prior to the fire, on or about 4 April 2006, insurance that EMR maintained in respect of the business and the premises was cancelled, and particularises a workers compensation policy, an annual cargo policy and a "fire and perils/burglary" policy; Mr Rizaie does not admit that allegation and says that Mr Changizi had control of EMR's administration (3FASC [92], Defence [55]). As I noted above, the evidence indicates that workers compensation and cargo insurance maintained by EMR lapsed on that date for non-payment, rather than being cancelled. Nothing turns on those policies, because it is not suggested that any workers were injured in the fire giving rise to any workers compensation claim or that any cargo was damaged in the fire, giving rise to a claim under the cargo policy. There is evidence that EMR had obtained a quote for insurance that would have provided limited fire cover, but the evidence does not establish that it took out such cover or that it was at any point cancelled, still less as part of a conspiracy of the nature pleaded by Mr Changizi.
Mr Changizi pleads, and Mr Rizaie denies, that Mr Rizaie cancelled the relevant insurance policies (3FASC [93], Defence [56]). That allegation is particularised by a claim that Mr Rizaie admitted cancelling the policy in a conversation with Mr Changizi and Mr Chaudhry, a solicitor, in December 2015. Mr Chaudhry's evidence, in cross-examination, does not establish the allegation that Mr Rizaie cancelled the relevant policy, since Mr Chaudhry fairly acknowledged his doubt as to whether there had been a reference to cancellation of the policy in the conversation that he had overheard. Mr Rizaie denied that he had cancelled the insurance cover in his affidavit evidence and in cross-examination.
Mr Bulley refers to documents produced by the insurance broker which indicated, as I noted above, that the workers compensation and cargo cover had lapsed for non-payment, as distinct from being cancelled, likely on Mr Rizaie's refusal to sign a proposal and direct debit authority, and that had occurred some 15 months before the fire occurred. He fairly accepts, in closing submissions, that:
"In the absence of an affidavit from the insurance broker … it is conceded that the insurance documents may not be determinative of the issue as to who it was who allowed the insurances in respect of the EMR business to either be cancelled or to lapse."
Mr Bulley submits that the Court should nonetheless find that Mr Rizaie had cancelled the insurance, by reference to the several admissions which Mr Changizi contends that Mr Rizaie had made and which I address below.
Mr Changizi also pleads that, prior to the fire, Mr Rizaie "conspired" with two other persons to "destroy EMR's M&H business and to take its business away for the benefit of themselves" (3FASC [94]). That allegation is particularised by reference to an admission alleged to have been made by Mr Rizaie in conversations with Mr Changizi and Mr Mousawel in 2015 and with Mr Changizi and Mr Chaudhry in December 2015 and with Mr Mina, an accountant, in about 2015. Not surprisingly, Mr Rizaie also denies that allegation (Defence [57]).
It will be convenient now to deal with the evidence and submissions as to these conversations together. Mr Bulley submits that:
"There is a clear conflict between the evidence of Mr Changizi as to the conversations at these meetings and the denials of Mr Rizaie. In that event, the Court ought to accept the version of events proffered in Mr Changizi's evidence where it is corroborated by the evidence of independent third parties, the Westpac Branch Manager, Mr Mousawel and the solicitor, Mr Chaudhry. The evidence of both those witnesses is consistent with, and corroborates, the versions of the discussions at the meetings contained in Mr Changizi's evidence.
It is the fact that each of these third parties were independent witnesses that makes their evidence compelling. The Court should find that the admissions made by Mr Rizaie at the meetings at which each third party was present were in fact made and that, consequently, such admissions were only made by Mr Rizaie because they were, in fact, true."
Mr Changizi relies on a conversation at a meeting between him, Mr Rizaie and Mr Mousawel as occurring in 2015 (Changizi T40-42, Mousawel T235-244). His evidence was that that conversation took place in English and Mr Mousawel's evidence was that it largely took place in English, and I prefer that evidence to Mr Rizaie's evidence in that regard. Mr Changizi's oral evidence of that conversation was as follows (T41-42):
"After couple of minutes, Hussain Rizaie, he arrived too to our meeting and he joined. I introduced Hussain Rizaie to Ahmad Mousawel. I said:
"Ahmad Mousawel, gentlemen, Hussain Rizaie, he was my ex business partner in the scrapyard business. At the moment, he want to join me, join me in my new business in a oil refinery business. So, he wants to invest with me and plus, I will use the his document and his company as a security to get loan for my truck for my business. So, I introduce Hussain Rizaie."
So, he shake hand too and he was doesn't know Hussain Rizaie. When we sit, he said, "Okay, can we start?" I said, "No. Ahmad Mousawel, before I start, I have to clear something with you and after that." He said, "Please, I don't have much time, please come to the point, talk about business matter." I said to him, "This is very important for me. Please, my friend, my partner, Hussain Rizaie, he's a good man and he's a honest. At the moment, he wants to admit about my, about my case, about my previous, previous case." He said, "Okay, tell me." I said to him, "Okay, tell you, but quick." I said to him:
"The quick is, Hussain Rizaie, him and my brother-in-law, Arif Muradi and Abbas Ali, they are involved when they burned my business. They cancelled my insurance. They took my business, they steal my business from me and they destroyed my life. The good thing is with Hussain, at least he admit front of you, front of Lata, front of lawyer, he admit he cheated me. He took my business and I forgive him. Now, we want to start new business."
And again, Ahmad Mousawel returned, "Oh my God. Hussain, Hussain, tell the truth," and he smiled, he said, "Yes, he tell the truth. Unfortunately, we are did". He said, "Why you did?" He said, "Unfortunately because before we was a poor and we never seen this type of big business, such big money. We thought, 'Come on, just grab it,' so we took it. Now, I feel sorry and I want to enter into new business with him." I said, "And this is the whole story." And he said - Ahmad Mousawel..(not transcribable)..he said, "How come you want to enter to this business, the guy he did?" I said to him, "I don't have a choice so, at least the guy, he, he apologised and I forgive him."
Mr Mousawel's evidence, in his affidavit dated 27 March 2018, was that:
"[Mr Changizi] introduced me to [Mr Rizaie]. [Mr Changizi] advised that he intended to go into a partnership with [Mr Rizaie]. We had a conversation with words to the following effect:
Changizi: [Mr Rizaie] wishes to have an interest in my oil recycling business. He wants 50%. As you know he was in my scrap metal business. The factory burnt down. [Mr Rizaie] was instrumental in and conspired with my brother-in-law and Ali Abbs in destroying the factory and my business and then taking it over."
I was very surprised that this issue would be raised and for that reason I recollect the meeting and the conversation.
I said: "Hussain, is this true?
Rizaie: "Yes, unfortunately it is true".
Changizi: "Even though he has done this to me, he has come and apologised, and I forgive him. We were partners and friends before."
It seems to me that Mr Changizi's account of this conversation was plainly reconstruction, directed to advancing his claim. Mr Mousawel verified the truth of his (Mr Mousawel's) account of the conversation in cross-examination, although he had little recollection of the conversation by the time he was cross-examined, apparently as a result of injuries and stress resulting from a later car accident. However, his account of the conversation was substantially undermined by his acknowledgement in cross-examination that, not surprisingly, he would not have proceeded with the proposed financing arrangements had Mr Rizaie then admitted to being an arsonist and a thief, as Mr Changizi claims he did, and it follows that, whatever else was said, no such admission was made in this conversation. Mr Rizaie was cross-examined about this conversation and denied that he had made the alleged admission in that conversation (T335-336). It is, of course, also highly implausible that Mr Rizaie would have admitted to arson and fraud on his first meeting with a stranger, at least if he understood what had been attributed to him in this conversation.
Mr Changizi also relies for this allegation on a meeting between him, Mr Rizaie and a solicitor, Mr Aziz, which Mr Chaudhry overheard in part, which he also dates as occurring in 2015. Mr Changizi referred in his second affidavit (Changizi 6.7.20 [64]) to a prior conversation with Mr Rizaie about visiting a solicitor concerning the proposed Partnership Agreement in respect of ANR, in which Mr Changizi is said to made a further admission as follows:
Changizi: "OK, we will go to one solicitor but the condition is that I will put the term and condition very toughly and you must admit in front of the lawyer what you did in burning down the factory."
Rizaie: "OK, I am happy and prefer then to go to your lawyer."
Changizi: "Why don't you go to your lawyer?"
Rizaie: "Unfortunately, I cannot admit in front of my lawyer that I was involved in burning down the factory. What I did and what Arif Muradi did and what Abas Ali did to you. This is confidentiality I cannot admit in front of my lawyer."
Changizi: "Swear by your conscience tell me the truth. How do you all organise to burn the factory?"
Rizaie "Satan, jealousy. Stinginess and taunts of my wife. So, all those push me and made me to burn the factory, and before burning the factory, me and Abas Ali and Arif Muradi already find and saw the new factory. We were planning from before to open our own business, but we didn't have equipment or customers. We discuss among us how we can kick you out. One day Abas Ali advised me to burn the factory and claim the insurance and we are three people so our share will become more and with the insurance money we can buy all equipment. I said I already cancelled the insurance, and Sam doesn't know. Abas Ali asked me why I cancelled the insurance. I told Abas Ali if I trust you, you must not be dobbing me in and you will not share with anyone. I said what's your reason of anger towards [Mr Changizi]. The first reason of Abas Ali was he cursed your mum and your sister, and he was very upset with you. Abas Ali said you are asking him for the money he owes you for his share in the business and he feels inferior and feels shy to you, Haji Qasim (Sam) [Mr Changizi]. After that I trust him and I shared the reason of cancellation of insurance and to burn the factory and we will finish from your slavery. If we burn everything the lease will be automatically cancelled and we only need a new warehouse. Abas Ali said he was thinking to how he could get rid of his debt to you. Abas Ali then said he agreed with my idea. So, I told him we must hurry up. Abas Ali said how. I asked Abas Ali do you have any experience with explosive at home? He said yes. He said he was coalmining in Pakistan. He said before they start the work he would blast the mountain to make mining easy and less cost. After Abas Ali told me an easier way to make explosive … [passage omitted] I told Abas Ali I have arranged for Liberty Plastic to store in the premises next door his empty cartons, boxes and plastic. We agree to start the fire from the next door premises. ... Abas Ali agreed this was good idea and will work."
I am not satisfied a conversation took place in these terms, where it is purportedly recalled by Mr Changizi in detail, several years after it occurred, and notwithstanding his claimed lack of recollection of many other matters throughout his cross-examination. The account of the method by which the fire was set, which Mr Changizi attributes to Mr Rizaie in this conversation, also appears to differ from the conclusions reached by the Police investigation as to the manner in which the fire was started (Ex D1, 139), and it would be odd if Mr Rizaie had made a confession of this length and character to Mr Changizi but lied, for no apparent advantage, about the way in which the fire was started. .
Mr Changizi's evidence of the further conversation with Mr Aziz and Mr Rizaie (T35ff) is that:
"Okay, first I said to Hasan Aziz - we went, I introduced Mr Hussain Rizaie and I said to Hasan Aziz:
"Hasan Aziz, I came here to draft a new business contract between me and Hussain Rizaie, but before to sign the contract, please, you're as a witness, listen the history of me, between me and Hussain Rizaie."
So he said, "What is the history?". I said to him:
"The history, he is my ex‑business partner and unfortunately, unfortunately I have very bad experience to share with you to - you must put those thing in the contract in case in the future it doesn't create problem for me."
And he said to me, "Okay tell me the history. What is the history?" So I said to Aziz, "Mr Aziz, this is Hussain Rizaie, my partner" and I turned my face to Hussain Rizaie, "Mr Hussain Rizaie, are you listening and you understand? I will speak with Hasan Aziz on English" and he said "Yes I do understand, I will listening." So I said to him, "If you're listening, please, I tell the truth. If I tell anything wrong or lie please tell me." He said "Okay, continue." And I turned my face to Aziz, I said to Mr Aziz:
"Unfortunately, unfortunately Hussain Rizaie, he was my partner in a scrap metal business and my brother‑in‑law become a partner and third party, Ali Abbas, they become a partner. Unfortunately, unfortunately, Hussain involved to burn my business. Hussain involved to cancel my insurance. Hussain steal my business. Unfortunately they are cheated me, but at the moment I forgive him. The reason is I forgive him, first thing, he's not a coward. At least he came to me and he apologise of me. One.
Second things, I want to create a new business. For my, for my new business I need a investor so, this guy have a money and he looking for a new business he want to invest with me. So, I do accept him but I put condition on him."
I told him, "Hussain Rizaie, I will accept you but the term and condition, you must admit what you did to me in, in past. Because of you, unfortunately, I lost my kids, I lost my family, I lost my reputation, I lost my everything because of you." And he said to me, "Yes, unfortunately we did, but please, don't, don't ask too, too much and this has happened, I do admit in front of Hasan Aziz." I said to him, "Mr Aziz, did you listen what he said?" and he said, "Hussain, this is true?" and he laughed - he smiled, he said, "Unfortunately yes, this is true." So that's it, I told him, "That's it. Please, the rest, you can continue," and he start continue to draft the contract.
It again seems to me that Mr Changizi's account of this conversation was also reconstruction at best, directed to advancing Mr Changizi's claim, and it is again implausible that Mr Rizaie would have admitted to arson and fraud at a meeting with a solicitor engaged to draft the contract in respect of ANR, if he had understood what had been attributed to him in this conversation. In any event, Mr Chaudhry's account of this conversation differs, in important respects, from Mr Changizi's account of it.
Mr Chaudhry's evidence, in his affidavit dated 14 March 2018, was that the conversation took place in December 2015 and was to the following effect:
Rizaie: Why do you want that strict clauses incorporated into the proposed Partnership Agreement?"
Changizi: "Because I can't trust you on the basis of my past experience. Can you please tell Mr Aziz that you conspired with my brother-in-law, Arif Muradi, and third partner, Ali Abbs, in order to take my business away from me after my factory was burnt down. While my business was uninsured at that particular time? You even cancelled my insurance."
Rizaie: "Yes, before the fire I cancelled the insurance. As I have already expressed my remorse on so many occasions that I was poor at that time and saw this as an opportunity to make a business for myself. Unfortunately I was involved in conspiring along with your brother-in-law Arif Muradi and your third partner, Ali Abbs to take your business. I opened up the same business at different premises and took your clients. But that is a long time ago and now I want to start afresh."
The reference to "conspired" and "conspiring" in this account of the conversation has a staged quality about it and the suggested admission that Mr Rizaie "cancelled" the insurance is inconsistent with the objective evidence, quite apart from the fact that the only insurance policies as to which there is evidence had lapsed some 15 months before the fire. Mr Changizi does not allege in this conversation that Mr Rizaie or Mr Ali or Mr Muradi were involved in the fire.
Mr Chaudhry was cross-examined as to the cancellation of the insurance and his evidence as to whether he heard a reference to the insurance being cancelled (T185) was that:
"To that effect maybe that - I don't recollect exact - now, again my affidavit is from three years ago now, and at that time whatever I - you know, my recollections were, I had written there. But as I said that I was outside the room and I heard the conversation to that effect that "Yes, it happened before the fire and I'm sorry I told you so many time, that that happened before the fire now, and yes I know that you lost business and we got your clients, but that's a thing of the past". But exactly, precisely about the insurance, I'm not sure what was, what was the wording. But yes, it was, you know, like it must have been mentioned at that time, to that effect."
Mr Chaudhry subsequently further qualified his account in cross-examination (T187) and recognised that the word "cancelled" may not be correct and that the words "conspired" and "conspiring" may not have been used. Ultimately, little turns on this conversation, since Mr Changizi did not then allege that Mr Rizaie had burnt down the business or caused it to be burnt down; the fact that the business was uninsured at the time of the fire is uncontroversial; the fact that insurance had previously lapsed for non-payment, as distinct from being cancelled, is established by the evidence; Mr Chaudhry recognises that the words "conspired" and "conspiring" may not have been used; and it is not controversial that Mr Rizaie became a shareholder in MTR, a company in the same industry as EMR, after EMR had ceased its business following the fire. Mr Rizaie was cross-examined about this conversation, claimed that the discussion was limited to the proposed contract and also denied that he had made the alleged admission in that conversation (T336-340).
Mr Changizi did not plead or particularise, but also gives evidence of, another admission said to have been made by Mr Rizaie in a conversation with a bank manager of the ANZ Bank at Merrylands, Ms Lata, who did not give evidence. Mr Changizi's oral evidence of that conversation (T39) was as follows:
"And after when they talk, I asked from Mrs Lata, "Mrs Lata, do you know Hussain very well?" She laughed, she said, "Of course, he's my, he's my friend and he's my good client. Even I took my husband to his factory and thanks God he have a big scrapyard business and he have a big business, and I loved it". I said, "Mrs Lata, so, you know them properly. You know my brother-in-law too, Arif Muradi?" she said, "Yeah, of course I know them, they are the partner." I said, "So, you don't know me?" She said, "No, you're - I saw you first time." I said:
"Okay, you saw me first time. Actually can ask from Hussain right now, this business when you went to the factory, this was belongs to me and I'm the creator of this business and Hussain, he had with me only small share and unfortunately, unfortunately, Hussain Rizaie, my brother in law and Abbas Ali, they are cheated me, you can ask from Hussain and they've cancelled my insurance first and they burned the factory too and they changed the, the business name and they took it, everything from me."
And she's, "Oh my God. Hussain, Hussain, tell the truth?" and he laughed, he said - not laughed, he smiled, he said, "Yes, tell the truth." And she said to him, "How come you can trust, you can involve?" I said to her:
"How come? There is a lot of thing unfortunately but the good, the good thing is Hussain Rizaie at least he is not a coward. He admitted he cheated me and I forgive me. He ask forgiveness, I did forgive him, but the condition, he admit. Now, front of you, he admit it too."
So, he(as said) said, "Really, you are a good man if you forgive and such the person, he destroyed your life and still you forgive. Hussain, you must respect him, you must care. He's very good man when he forgive." He said, "Of course, this time I will stand with him. I will do business again with him.""
I do not accept Mr Changizi's account of this conversation for the reasons noted above as to his evidence generally.
Mr Changizi also relies on a meeting between him, Mr Rizaie and Mr Mina, which he also dates only as occurring in 2015 at which he again contends an admission was made by Mr Rizaie. Mr Bulley did not identify any evidence of that conversation given by Mr Changizi. However, Mr Mina gave oral evidence of that conversation on subpoena. Mr Bulley fairly conceded in closing submissions that Mr Mina's recollection of the discussions is "scant" (although I interpolate that one might have expected him to recall admissions of arson and fraud, which are hardly an everyday occurrence, had they occurred) and that the "evidence he was able to give in proper first person form as to who said what and to whom is lacking". Mr Mina's recollection is that Mr Changizi "mentioned the word it's type of arson" and that the fire was deliberate, as is plainly the case, but, importantly, "[h]e did not accuse anyone", with the consequence that any response by Mr Rizaie could not have been an admission that he or Mr Ali or Mr Muradi were involved in the fire since that allegation had not been made. Mr Mina also observed, at the conclusion of his evidence of this conversation (T261) that:
"Mr Rizaie was always saying yes on everything. I'm not quite sure whether he understands what he say yes about or not. The most important that he said yes about everything."
That evidence significantly undermined Mr Changizi's reliance on Mr Rizaie's asserted agreement to the elaborate propositions as to his wrongdoing which Mr Changizi claims to have put to him in these several conversations.
Returning now to Mr Changizi's pleaded case, he pleads, and Mr Rizaie denies, that by reason of the matters pleaded in paragraph 88 (starting or causing to start the fire); paragraph 93 (cancelling the policy) and paragraph 94 (conspiring to destroy the business and take the business way), Mr Rizaie breached each of his duties (as pleaded) to EMR (3FASC [95], Defence [58]). In his written outline of closing submissions, Mr Bulley submitted that:
"The destruction by Mr Rizaie of EMR's business by fire is a clear dishonest breach of both his statutory and fiduciary duties owed to EMR. …
In these proceedings the conduct of Mr Rizaie is, it is submitted, in a category much worse than the mere diversion of business opportunities away from the company in which he was a director. The fraudulent conduct of Mr Rizaie, in his involvement in either setting or being involved in the setting of the fire is, a fortiori a more egregious breach of Mr Rizaie's duties in that the fire had the consequence of EMR's business ceasing to operate.
The breach of his fiduciary duties and his subsequent operation of the MTR business, being an equivalent business to EMR's business and operated 200 metres from the Premises, makes Mr Rizaie liable to account for his interest in MTR and to account for the profits earned by him from that business, which has been operating now for almost 14 years."
In oral closing submissions, Mr Bulley fairly accepted that the allegation turns on Mr Rizaie's being involved in starting the fire, as a step in diverting EMR's business to MTR, and Mr Carney rightly accepted that it could scarcely be contended that a director did not breach the no conflict duty by burning down the business premises to assist him to establish a competing business. The real question is not whether the matters alleged against Mr Rizaie would amount to a breach of fiduciary duty, had they occurred, or could give rise to a liability to account on that basis, but whether those matters are established. This allegation is not established, because Mr Changizi has not established Mr Rizaie started the fire, or caused the fire to be started, whether alone or in concert with others. The interviews by the Police demonstrated that several persons, including Mr Changizi, had reason to start the fire, and I am not satisfied to the requisite standard that the admissions on which Mr Changizi relies were made, or at least were made in circumstances where Mr Rizaie had a sufficient understanding of the allegation that was made against him to make that admission meaningful.
As I noted above, it is not necessary to deal with the allegations of breach of statutory duties under ss 181-183 of the Corporations Act, since the balance of authority indicates that a claim for compensation for a breach of those sections is not assignable and Mr Changizi does not press those allegations. Turning now to the claim for breach of fiduciary duty, I accept that if it were established that Mr Rizaie had started the fire or caused it to be started, that would likely have amounted to at least a breach of the no conflict rule, so far as he had done so to advance his own interests in conflict with his duty as a director of EMR. However, that has not been established for the reasons noted above. I accept that, had it been established that Mr Rizaie had cancelled the policy in order to cause maximum loss to EMR as a result of the fire and to advance a scheme to establish a competing business, that would also likely have amounted to a breach of the no conflict and no profit rules. However, that also has not been established. As I have noted above, nothing turns on the position in respect of the workers compensation and cargo policies, and EMR had no need to insure the building, because the landlord and not EMR owned the building. At best, Mr Changizi has established that Mr Rizaie did not consent to a renewal of the remaining insurance policy, because he considered it was too expensive. The decision not to renew that remaining policy may or may not have been a prudent one, although that is uncertain where it has not been established that EMR had any substantial economic interest in the Equipment at the premises, or suffered any loss by reason of its destruction. Even if that decision might have amounted to a breach of Mr Rizaie's duty of care owed to EMR, which was not pleaded and not established, it has not been shown that it amounted to a breach of the no conflict or no profit rules.
Mr Changizi pleads (3FASC [96]) that EMR has suffered loss and damage by reason of these matters. This allegation is particularised as follows:
"EMR has suffered the loss of the value of its Equipment and the value of its M&H business which was trading at a profit at the time of the Fire. M&H also suffered from the lost opportunity to continue to trade the M&H business into the future and to earn profits from it on an ongoing basis."
Mr Rizaie responds by admitting that EMR suffered loss and damage as a result of the fire, but denying that it suffered loss or damage as a result of action on his part. I proceed on the basis that EMR suffered some loss as a result of the fire, where Mr Rizaie admits that matter. However, Mr Changizi has not established that EMR has suffered the loss of the value of the Equipment, because he has not established that EMR owned the equipment or had any economic equity in it; he has not established the value of its M&H business or that it was trading at a profit at the time of the fire; and he has not established any opportunity of M&H (or EMR) to continue to trade the M&H business into the future for any value or that it was more likely than not that it would earn profits from that business on an ongoing basis.
Mr Changizi also pleads the establishment of a competing business by Mr Rizaie, Mr Ali and Mr Muradi. He pleads that, following the destruction of EMR's premises, the Equipment, EMR's books and records and the M&H business, Mr Rizaie, Mr Ali and Mr Muradi caused MTR to be incorporated on 20 July 2007 in which they were the sole equal shareholders and directors (3FASC [97]). Mr Rizaie denies the allegation concerning the assets of the M&H business in that paragraph, but otherwise does not seem to plead to the paragraph (Defence [60]). Mr Changizi pleads and Mr Rizaie admits, that MTR conducted the business of scrap metal recycling at other premises in Smithfield since its incorporation (3FASC [99], Defence [61]). He pleads that Mr Rizaie is liable to account to EMR for the benefits received by him as a consequence of the alleged breach of duties, including benefits received as a shareholder from or in connection with MTR and the business conducted by it.
Mr Bulley fairly accepted in closing submissions that this claim depended on the proposition that Mr Rizaie was involved in the fire and that involvement was the first step in appropriating EMR's business to MTR, and Mr Changizi did not contend that he could succeed in this claim merely because Mr Rizaie was a director of EMR and then became a director of MTR and involved in its competing business, a fortiori where that occurred after EMR's business had ceased and Mr Changizi had left for Pakistan, absent involvement by Mr Rizaie in bringing about the fire. Although Mr Changizi had sought to establish, in his evidence, an unpleaded allegation that Mr Rizaie had sought to divert customers of EMR to MTR, that allegation had the difficulty that other evidence (including Mr Changizi's evidence to the Police) indicated that EMR had no regular customers to be diverted in that way. Mr Bulley's concession rightly recognised that a director does not necessarily breach his or her duties by becoming involved in a competing business, absent evidence of misuse of confidential information or of the diversion of employees, customers or suppliers to that other business, although that proposition has been approached with caution in case law and academic commentary: London & Mashonaland Exploration Co v New Mashonaland Exploration Co [1891] WN 165; Bell v Lever Bros Ltd [1932] AC 161; Links Golf Tasmania Pty Ltd v Sattler (2012) 90 ACSR 288; [2012] FCA 634 at [562]; Clarence Property Corp Ltd v Sentinel Robina Office Pty Ltd [2019] 1 Qd R 144; [2018] QSC 095 at [107]-[108]; M Christie, "The Director's Fiduciary Duty not to Compete" (1992) 55 MLR 506. This claim cannot succeed where Mr Changizi has not established that Mr Rizaie was involved in the fire or that any such involvement was a first step in appropriating EMR's business to MTR, as distinct from the incorporation of MTR occurring in response to the destruction of EMR's business and Mr Changizi's then leaving Australia shortly after the fire.
By way of relief, Mr Changizi seeks judgment for damages or equitable compensation in respect of the destruction of the business of EMR. That order cannot be made where, as Counsel accepted in opening submissions, there is no evidence as to the quantum of such damage or loss. Alternatively, he seeks an order that Mr Rizaie account to Mr Changizi for the benefits received by him from, or by reason of his shareholding, in MTR. I accept that such an order could be made in an appropriate case: Ancient Order of Forresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43. However, that order cannot be made here, because no breach of duty is established in Mr Rizaie acquiring an interest in MTR, where his involvement in the fire was not established. Alternatively, Mr Changizi seeks a declaration that the shares held by Mr Rizaie in MTR are held on trust for him and an order that he account for dividends from MTR. That order also cannot be made, because the underlying claim for breach of fiduciary duty is not established. A consequential order is sought to give effect to a transfer of Mr Rizaie's shares in MTR to Mr Changizi, but that order would not be made for the same reasons.
For completeness, it is not necessary to determine any question as to the effectiveness of the Deed of Assignment dated 30 October 2018 (Ex P3), on which Mr Changizi relies to establish his standing to bring the claim for breach of fiduciary duty, where that claim is not established on its merits. In closing submissions, Mr Carney indicated that Mr Rizaie did not press any limitations defence in respect of any claim for breach of fiduciary duty against him, and did not press defences pleaded in paragraphs 65-66 of his Defence relying on waiver or release of Mr Changizi's equitable rights or the discontinuance of claims against Mr Muradi and Mr Ali. I should note that, had I found the admissions alleged by Mr Changizi had been made by Mr Rizaie, there may have been a real question whether equity might have declined relief founded on them to Mr Changizi, on the basis of a wider principle of unconscionability, where Mr Changizi's account of the conversations was replete with claims to have forgiven Mr Rizaie for the relevant conduct, and the claims now made would resile from that position. That issue does not arise on the findings that I have reached.
It is common ground that, in 2015, Mr Rizaie caused $100,000 to made available to Mr Changizi for the investment in ANR (Rizaie 16.10.19, [93]) and that, in late 2015, Mr Rizaie provided the balance of his $500,000 investment in ANR by way of instalments into ANR's bank account (Rizaie 16.10.19, [109], [111]). It appears that, on 15 October 2015, Mr Rizaie caused $60,000 to be transferred to ANR's Westpac account; on 26 and 27 October 2015, Mr Rizaie caused two amounts of $50,000 to be transferred to ANR's Westpac account; on 29 October 2015, Mr Rizaie caused a third amount of $50,000 to be transferred to ANR's Westpac account; on 12 November 2015, Mr Rizaie caused $15,000 to be transferred to the ANR's Westpac account; on 25 November 2015, Mr Rizaie caused $10,000 to be transferred to ANR's Westpac account; on 27 November 2015, Mr Rizaie caused $120,000 to be transferred to ANR's Westpac account; and, on 30 November 2015, Mr Rizaie caused $100,000 to be transferred to ANR's Westpac account (Ex D2, 354, 356-357).
Mr Rizaie claims that, in early or mid 2016, he discovered that funds were missing from ANR's bank account (Rizaie 16.10.19 [159]); that Mr Changizi then showed him a cheque for $3,000,000 (Rizaie 16.10.19 [166]-[168]); in mid-2016, he discovered that the invoice as to the supply of the oil tanks was "not genuine" (Rizaie 16.10.19 [173]) and that Mr Changizi had been using ANR's business premises for tyre recycling and then that the tyre recycling machines has been removed from those business premises (Rizaie 16.10.19 [182]-[184]); and, in mid or late 2016, Mr Rizaie cancelled the lease agreement for ANR's premises, scrapped (or sold) the oil tanks and other items relating to ANR (Rizaie 16.10.19 [185]).
In cross-examination, Mr Rizaie's evidence (T319) was that Mr Changizi did not tell him that the purchase price for the tanks was $1,155,000 but he appears to have drawn that conclusion from the invoice on which he relies:
"Q. So Mr Changizi told you that the sale price of the tanks was $1,155,000?
A. INTERPRETER: No, that wasn't the case. He showed this to me. I don't know if it was in the beginning, but at some point he showed that to me, and he said that I have purchased, and I trusted him, and based on that I started working, started business with him."
He also referred in his cross-examination to having relied "on this invoice on this amount to start the business with him" (T319) and to his belief "that invoice I trusted that it was genuine and that he had purchased and I started based on that" (T322). He denied Mr Changizi's claim that he, Mr Rizaie, needed that invoice in order to borrow funds to invest in the business.
The invoice (Ex D2, 393) on which Mr Rizaie relies is dated 12 June 2015, was issued by All Oils to ANR and referred to the supply of items described as "storage tanks for starage [sic] purchased for free total 7 tanks holding 500 mt" (emphasis added) and then stated a price of $1,050,000 plus GST of $105,000 for a total of $1,155,000. Notwithstanding Mr Rizaie's initial evidence as to his limited skills in English, it seems to me that he had sufficient skills in written English to read an invoice issued in English, and that is implicit in his claim to have relied on it. The highly unusual language "purchased for free" plainly qualified any suggestion that the oil tanks had been paid for (Ex D2, 393) and, in any event, the document was an invoice not a receipt and recorded the price as unpaid rather than paid. All Oils subsequently treated that invoice as genuine in a letter dated 20 December 2017 written to Mr Changizi, which demanded the return of those tanks, referred to non-payment of that invoice and claimed $985,000 in respect of the tanks and additional amounts in respect of waste motor oil and the provision of business standards technology and set-up time (Ex P2, 596).
In his affidavit dated 16 October 2019, Mr Rizaie also refers to a telephone conversation with a third party at the time his investment in EMR was under discussion, which indicated that a tank with the capacity for 60 tons of oil would cost around $300,000 including GST. In cross-examination, Mr Rizaie accepted (T324-325) that he heard that conversation when the phone was put on speaker and understood the conversation although it was in English. That conversation is of significance for the allegation as to the value of the oil tanks, at least if determined on a replacement cost basis.
Turning now to Mr Changizi's evidence as to these matters, he refers, in his affidavit dated 17 March 2018, to a conversation with Mr Rizaie which he says took place after the Partnership Agreement was signed, in which Mr Rizaie said that he did not have $1 million to invest in ANR, would need to arrange the money with his family, and requested an invoice for $1 million for fuel tanks "to show value", and Mr Changizi then claimed the "replacement cost of the tanks is in excess of $1 million" found in the cost of manufacture, and that he would contact All Oils and see what could be done. Mr Changizi's evidence is that he does not recall seeing the relevant invoice. I do not accept that evidence given the view I have formed as to his credit. In his second affidavit dated 6 July 2020, Mr Changizi gives evidence of a discussion about the oil recycling business and Mr Rizaie's investment in ANR in which he says he said "I have sourced 7 second hand oil storage tanks. The value of those tanks is $1,155,000" and he refers to a telephone call to a third party to obtain a verbal quote for a substantial stainless steel storage tank. Mr Changizi's account of that conversation, which I again approach with caution, indicates he told Mr Rizaie that the "value" of those tanks was $1,155,000 although that claim was made in the context of the indication given by a third party of the cost to purchase tanks.
Returning to the pleaded Contribution Representation, I accept that Mr Changizi made a representation that he had obtained fuel tanks for use by ANR, and he had in fact caused All Oils to make those tanks available to ANR although the underlying commercial arrangements between ANR and All Oils are obscure. I am not persuaded that Mr Changizi made a representation to the effect of the second element of the pleaded Contribution Representation that he had "purchas[ed]" the oil tanks "on behalf of ANR". As I noted above, the invoice on which Mr Rizaie relies itself recorded the stated price for the tanks was unpaid and described them using the unusual phrase "purchased for free" and the conversations between Mr Rizaie and Mr Changizi, on either of their versions of them, are obscure as to the basis on which the tanks were obtained from All Oils. I think it likely that Mr Changizi made a representation that the "value" of the tanks as calculated by reference to replacement price was at least the stated price and, on Mr Rizaie's account of the conversation, he also represented the tanks had been obtained cheaply. I also recognise that the later written Partnership Agreement referred to a contribution by Mr Changizi referable to the "value" of the tanks (as distinct from the amount paid for them) but that figure appears to reflect the result of the parties' inquiry as to the replacement cost of the tanks rather than any assessment of market value in an orthodox sense. I also recognise that Mr Rizaie or persons associated with him paid substantial monies to ANR, although not necessarily the amount of $600,000 that he claims. I am not satisfied that these matters support the pleaded allegation as to the Contribution Representation given the matters I have noted above and the wider lack of clarity and transparency in the commercial and monetary arrangements between the parties.
For completeness, Mr Rizaie also pleads (AFCC [7(c)] a representation that Mr Changizi would pay $200,000 to become the owner of half of the shares in Puls. Nothing turns in the pleading on that representation, which Mr Rizaie does not seek to falsify, and Mr Carney fairly accepted in closing submissions that any claim based on that representation was not pressed.
It will be convenient to depart from the order of Mr Rizaie's pleaded Cross-Claim and deal with the question of the falsity of the pleaded Contribution Representation before returning to Mr Rizaie's claim to have relied on that representation. Mr Rizaie pleads (AFCC [29]) that the Contribution Representation was false in that Mr Rizaie did not purchase on behalf of ANR, or cause to be transferred to ANR, fuel storage tanks from All Oils and did not purchase or otherwise procure fuel storage tanks to the value of $1,050,000. As I noted above, I accept that Mr Changizi made a representation that he had obtained fuel tanks for use by ANR, but that representation is not falsified where he had in fact caused All Oils to make those tanks available to ANR, although I noted above that the underlying commercial arrangements between ANR and All Oils are obscure. I did not accept that Mr Changizi made a representation that he had "purchas[ed]" the oil tanks "on behalf of ANR", although that representation would plainly have been false had it been made. I accepted above that Mr Changizi made a representation that the "value" of the tanks calculated by reference to replacement price was at least the stated price. It is plain that both parties gave weight to that measure of value, where it is common ground that they together obtained a third party quote for that figure, notwithstanding that many might think that was not an appropriate basis to calculate an objective (or "market") value for those tanks. I cannot find that the representation that was made as to the replacement (as distinct from market) "value" of the tanks was misleading or deceptive, where Mr Rizaie knew the basis on which that value had been reached, for what it was worth. To the extent that the Contribution Representation was made, it has not been falsified.
Mr Rizaie also pleads that Mr Changizi did not contribute any valuable equipment to ANR, but that is not established where there is evidence that he at least introduced tyre recycling equipment to the business for a period. Mr Rizaie pleads that the tax invoice was not "genuine"; if that allegation is understood in the sense that the transaction did not occur in fact, it is not established, so far as it appears that tanks were made available to ANR, although (as the invoice itself disclosed) they were not purchased for $1,050,000. Mr Rizaie also pleads that the invoice was created by All Oils at the request of Mr Changizi, but he knew that matter at that time. He also pleads that the invoice falsely recorded that fuel tanks were sold by All Oils and purchased by ANR and the price payable was $1,050,000 plus GST. The invoice did not record the first of those matters, and it indicated that amount was unpaid, for the reasons noted above. Mr Changizi responds (AD [29]) that Mr Rizaie knew the tax invoice was false and it was obtained for Mr Rizaie's own purposes. I am not persuaded of that proposition, given the views that I have formed as to Mr Changizi's credit, but it is not necessary for that proposition to be established for Mr Rizaie's claim to fail.
Returning to the question of reliance, Mr Rizaie pleads (AFCC [20]-[21]) that, in reliance upon the Contribution Representation, he entered into a "Verbal Partnership Agreement" with Mr Changizi in about August 2015 and that the Verbal Partnership Agreement included terms that Mr Rizaie would contribute $1 million to ANR (being a sum approximately equal to the equipment purportedly contributed to ANR by Mr Changizi) with $600,000 to be paid within a reasonable time and $400,000 to be paid by June 2016; Mr Changizi would be issued 50% of shares in ANR in consideration for his purported contribution to ANR of equipment to the "value" of approximately $1 million and Mr Rizaie would be issued 50% of the shares in ANR, in consideration for his contribution of $600,000 and his agreement to contribute a further $400,000 to ANR; and Mr Changizi would pay the amount of $200,000 to Puls and would be issued half of the shares in Puls in consideration of that contribution. Mr Changizi responds by pleading the terms of the written Partnership Agreement, including a reference in a recital to Mr Rizaie paying a sum of $400,000 to ANR by June 2016, and to a reduction in his shareholding if he did not do so; and he accepts that Mr Rizaie was to pay $1 million and contends that $400,000 of that amount was unpaid at the time a written Partnership Agreement was entered into. It is not necessary to determine any question of reliance where the pleaded Contribution Representation, to the extent that I found it was made, was not falsified.
Mr Rizaie also pleads (AFCC [22]) that he deposited $600,000 into a bank account owned by ANR by instalments between October 2015 and 30 April 2016 and caused Mr Changizi to be paid that amount. That allegation assumes that payments to ANR could be treated as a payment to Mr Changizi. Mr Changizi admits that the amount of $600,000 was paid by Mr Rizaie but otherwise denies that allegation. Mr Rizaie also pleads (AFCC [23]) that he caused 15 ordinary shares in Puls to be issued to Mr Changizi, representing an equal number of shares to the shares held by him, and Mr Changizi admits that he and Mr Rizaie both owned 15 shares in Puls. Nothing turns on that allegation in respect of the relief claimed by Mr Rizaie. Mr Rizaie pleads (AFCC [24]) and Mr Changizi denies, that he relied upon the Contribution Representation in entering into the "Verbal Partnership Agreement", making the pleaded payments and making the allotment of shares in Puls. It is again not necessary to determine any question of reliance where the pleaded Contribution Representation, to the extent that I found it was made, was not falsified.
Mr Rizaie in turn pleads (AFCC [25]-[26]) the entry into a "Written Partnership Agreement" in about September 2015, which he contends "re-cited" the terms of the Verbal Partnership Agreement and contained additional terms. Mr Rizaie again pleads that he relied upon the Contribution Representation in entering into the Written Partnership Agreement (AFCC [27]). Mr Rizaie also relies (AFCC [28]) on a recital in the Written Partnership Agreement which recorded that "[i]t is hereby agreed that Mr Changizi holds 50% of the shares in consideration of the tanks valued at $1 million" and pleads (AFCC [31]) that, had he known the Contribution Representation was false, he would not have entered into the alleged Verbal Partnership Agreement, deposited instalments totalling $600,000 into ANR's bank account or entered into the Written Partnership Agreement. These allegations are denied by Mr Changizi. I have addressed the recital to the Partnership Agreement above and it is otherwise not necessary to determine any question of reliance where the pleaded Contribution Representation, to the extent that I found it was made, was not falsified.
Mr Rizaie in turn pleads (AFCC [33]-[34]), and Mr Changizi denies, that the relevant conduct was misleading or deceptive in breach of s 18 of the Australian Consumer Law or misleading or deceptive "at general law" or "conduct amounting to fraud" on Mr Changizi's part and claims that he has suffered damage in the amount of $600,000 paid to ANR and interest on that amount. Counsel did not address the applicable statutory provisions or legal principles. I will do so only briefly, where Mr Rizaie's claim is not established on its facts. It seems to me that the alleged representation by Mr Changizi was made in relation to a financial product, being shares in ANR, and s 1041H of the Corporations Act likely applies to the exclusion of s 18 of the Australian Consumer Law (on which Mr Rizaie relied) by reason of s 131A of the Competition and Consumer Act 2010 (Cth): Australian Competition and Consumer Commission v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 at [24]. It may be that nothing would have turned on that had Mr Rizaie's claim been established on its merits, and I need not otherwise address whether the jurisdictional basis for the application of s 18 of the Australian Consumer Law is established given the findings I have reached on other grounds.
The approach to be adopted in assessing whether conduct is misleading or deceptive was summarised by Gordon J in Australian Competition and Consumer Commission v Telstra Corporation Ltd (2007) 244 ALR 470; [2007] FCA 1904 at [14]-[15], in a passage which Griffiths J followed in Forty Two International Pty Ltd v Barnes (2014) 97 ACSR 450; [2014] FCA 85 at [446] and which I followed in Re Colorado Products Pty Ltd (in prov liq) above at [86], as follows:
"The relevant legal principles have been well traversed by Australian courts. A two-step analysis is required. First, it is necessary to ask whether each or any of the pleaded representations is conveyed by the particular events complained of … Second, it is necessary to ask whether the representations conveyed are false, misleading or deceptive or likely to mislead or deceive. This is a 'quintessential question of fact'" … [citations omitted]
Conduct is misleading or deceptive or likely to mislead or deceive if it is capable of inducing error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54. It is not necessary for Mr Rizaie to establish that Mr Changizi intended to mislead or deceive and the relevant question is whether, viewed objectively, the relevant conduct was misleading or deceptive or likely to mislead or deceive: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 per Gibbs CJ, 216 per Brennan J; [1982] HCA 44; Australian Competition and Consumer Commission v Jewellery Group Pty Ltd (2012) 293 ALR 335; [2012] FCA 848 at [66]. Conduct is likely to mislead or deceive if there is a real and not remote chance or possibility that a person is likely to be misled or deceived, and this is so even though the possibility of that occurring is less than 50 per cent: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [112] per McHugh J; Colorado Products above at [87]; Redmond Family Holdings v GC Access Pty Ltd [2016] NSWSC 796 at [49]ff. For the reasons noted above, I am not satisfied that the pleaded Contribution Representation, to the extent that I found it was made, was misleading or deceptive in breach of s 18 of the Australian Consumer Law.
Counsel did not identify any other legal principle giving rise to liability for "misleading or deceptive" conduct at general law and did not seek to formulate a claim in innocent or negligent misrepresentation, and such a claim is not established. I apply the standard specified in s 140 of the Evidence Act in respect of Mr Rizaie's allegation of fraud against Mr Changizi and that claim is not established for the same reasons. Mr Rizaie's Cross-Claim therefore fails.